OneCoin: A $4 Billion ICO That Ended up Being A Ponzi Scheme, Never Had a Functioning Cryptocurrency or Blockchain, Leader Arrested But Founder Still on the Run

March 13, 2019 / by Zachary Mashiach

The War On Shitcoins Episode 14: OneCoin. The war on shitcoins is a Crypto.IQ series that targets and shoots down cryptocurrencies that are not worth investing in either due to their being scams, having serious design flaws, being centralized, or in general just being worthless copies of other cryptocurrencies. There are thousands of shitcoins that are ruining the markets, and Crypto.IQ intends to expose all of them. The crypto space needs an exorcism, and we are happy to provide it.

OneCoin is perhaps the most aggressive ponzi scheme in cryptocurrency history. Between Q4 2014 and Q3 2016, $3.767 billion was raised in an “ICO” for OneCoin, nearly as much as the record $4 billion EOS ICO. Unlike EOS, OneCoin never had a blockchain and never existed as a cryptocurrency.

The OneCoin ponzi scheme functioned by selling packages to customers. OneCoin claimed that customers were simply buying educational materials, and the OneCoin tokens were just a supplemental incentive. In this way, OneCoin tried to remove all responsibility for the OneCoins not having value since the company could claim that the educational materials were the product that was being sold. Ultimately, it has been revealed that the educational materials were plagiarised, and at OneCoin meetings, the educational materials were never the focus.

The OneCoin starter package was 110 EUR and went all the way up to 13,750 EUR for a premium trader package and 55,555 EUR for an initial launch pack. These packages continue to be sold on OneLife, which is the same OneCoin ponzi scheme but slightly rebranded. It is shocking that the scam continues to this day, especially since OneCoin was widely known as a scam as early as 2016.

When a customer buys a package, they receive the “educational materials” in addition to tokens that can be used to mine OneCoin. Note that customers do not directly receive OneCoins. The customer must then submit these tokens for mining, which activates a display that says mining is in progress. OneCoin claimed to have mining farms and put up a facade that mining was actually occurring, but there was no real mining.

After a long period of time customers may finally receive OneCoins. The price of OneCoin was shown to be constantly increasing on the dashboard, from 0.50 EUR all the way to 30 EUR. This price was determined by the OneCoin company and had no relevance to the free market.

Users with starter packages never had the ability to exchange OneCoins for fiat. Those with a trader package, which costs 550 EUR, were able to cash out OneCoins on the xcoinx exchange, which was not a true cryptocurrency exchange. This exchange had tight limits for the amount that could be sold, and shutdown without warning in January 2017. After that, OneCoins became worthless.

Ultimately, investigators found that OneCoin did not even have a blockchain, and the company was able to create OneCoins at will.

The truly insidious part of the OneCoin scheme was that it offered commissions to users for recruiting customers. These commissions were paid with EUR and could be withdrawn with a wire transfer. This motivated numerous users to peer pressure their friends, family, and acquaintances to invest money in the OneCoin scheme. Ultimately, more than 3 million users ended up being recruited into the OneCoin Ponzi.

The Founder of OneCoin, Ruja Ignatova, disappeared in October 2017 and transferred leadership of OneCoin to her brother Konstantin Ignatova. Konstantin was arrested at Los Angeles International Airport on March 6 and charged with conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

Apparently, Konstantin had been meeting OneCoin affiliates in the United States, and during a meeting said: “If you are here to cash out, leave this room now, because you don’t understand what this project is about.”

Ruja has been indicted for conspiracy to commit wire fraud, securities fraud, and money laundering, with each charge carrying a maximum sentence of 20 years in prison. Ruja remains on the run, although now that Konstantin is in custody, perhaps law enforcement will have a better chance at catching her.

Meanwhile, Florida resident Mark S. Scott was arrested in September for helping OneCoin launder $400 million and faces up to 20 years in prison.

Overall, it seems the OneCoin Ponzi scheme is finally collapsing with the arrest of the OneCoin leader. However, this may be too little too late, with likely over $4 billion scammed from users worldwide. OneCoin is undoubtedly one of the most aggressive and prolific scams in cryptocurrency history, even though OneCoin did not even have an actual blockchain or cryptocurrency.